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Teacher Pension Shift A Major Move

With a $1 billion deficit to address, good news is going to be difficult to come by from this year’s legislative session in Annapolis.

The money has to come from somewhere, and we are starting to get a glimpse at exactly what lawmakers have in mind.

Gov. Martin O’Malley’s budget proposal got the ball rolling this week, including precisely what county governments across the state were hoping not to see — shifting the burden of teacher retirements costs to the counties.

This concept has been floated annually for some time. Fortunately, the big three counties — Baltimore, Montgomery and Prince George’s — oppose it because it was thought to mean millions of dollars for them, and those three counties largely decide the state’s direction.

However, an O’Malley spreadsheet released this week detailing the local net impact reveals the shift is not as significant as once thought, but many jurisdictions are worried about future fiscal years and whether the proposed state allocations aimed at easing the hardship caused by this change will actually have any impact at all.

Under the governor’s proposal, Montgomery County, shockingly, will receive an additional $18 million from the shift, but Baltimore County would need to find more than $2.8 million.

Locally, for example, according to governor’s office figures, thanks to the new expenditures the counties will be receiving from the state through his budget, the move will have a zero net impact for Wicomico in fiscal year 2013 and will require Worcester to come up with an additional $674,445 in the next budget. That’s far less than what Worcester thinks, as it’s preparing for a new expense of $2.1 million annually.

Currently, the state pays all of local teacher retirement expenses and none of the social security costs, which are funded by the individual counties. The governor’s budget proposes the state fund half of the teachers’ social security and retirement contributions, while the counties would pay one-third of the combined costs.

Although county officials bemoan the shift, it actually is fair, considering local governments decide teacher salaries, which determine pension costs. What would have been unfair was to shift the responsibility without a plan to aid the counties in handling the new expense. The governor’s plan does appear to do that in the short term, but the concern is future years.

As is often the case, the details of the entire state budget, approved by the legislature, will spell out the consequences of this proposal and it will be a couple months until all the fiscal numbers are known. In the meantime, county budgets are in a state of flux and officials wait with their fingers crossed.